False Flags, Fake Docs, and Fraudulent Routes

Strategies to Track Russian Oil Price Cap Evasion

📅 March 19, 2025

Russia’s continued evasion of the $60 per-barrel price cap set by the Price Cap Coalition in 2022 aims to deceive stakeholders in the maritime industry and increase Moscow’s revenues from energy shipments. Financial institutions and other entities involved in the energy trade—through insights provided by contracts, invoices, receipts, and other documentation—can detect indicators of evasion and help protect their organizations from regulatory risk and reputational damage emanating from transacting with illicit actors.

Russia’s Shadow Fleet

The dangers of the “shadow fleet” go far beyond the regulatory and reputational risk of transacting with possible evaders of the price cap on Russian oil or sanctioned individuals and entities. The “shadow” trade in Russian oil also has shifted trade routes, endangered underwater infrastructure, and caused environmental disasters, because the vessels involved in this shadow trade are many times old, poorly maintained, and engage in dangerous practices at sea. An EU briefing in late 2024 noted that in May of last year, there have been at least 50 reported incidents involving shadow fleet tankers, including fires, engine failures, collisions, loss of steerage, and oil spills. Because of insufficient insurance and murky ownership of these vessels, recovery for damage, oil spills and rescue operations almost certainly will be difficult.

Italian authorities in February reported that Malta-flagged tanker, the Seajewel, reported two explosions heard by the ship’s crew while offloading oil at one of the Savona port’s offshore terminal buoys. The Greek-owned vessel is known to regularly transport Russian oil, and an investigation revealed two holes in the ship’s hull and dead fish around it, according to maritime analytics company Windward.
Germany’s Central Command for Maritime Emergencies in January said that a tanker that was part of Russia’s “shadow fleet” that was loaded with likely Russian oil had lost power and steering and was adrift off the northern coast of Germany.
Two aging Russian tankers spilled oil that earlier this year reached the beaches of the Crimean peninsula that Russia had illegally annexed more than 10 years ago. Ukraine called the spill “the largest in the Black Sea region” this century, accusing Russia of using older vessels no longer suitable for the harsh winter conditions in the area to evade sanctions.
Finland in late 2024 seized the Eagle S—a vessel that carried Russian oil—on suspicion that it damaged an undersea power line and four telecommunications cables in the Baltic Sea. The Eagle S was identified by Lloyd’s List as part of Russia’s shadow fleet and as affiliated with the Indian company Peninsular Maritime India PVT, which in turn was affiliated with two sanctioned companies—both based in the UAE—Radiating World Shipping Services and Star Voyages Shipping Services and considered to be leading shadow fleet operators. The Eagle S was also found to have Russian spy gear onboard.

The vessels in Russia’s shadow fleet fly flags of convenience, register ownership with tax havens, switch off their radio signals to obscure their movements, and frequently transfer cargo to other ships.

Flags of Convenience

The United Nations Convention on the Law of the Sea (UNCLOS) rests the primary responsibility and regulatory control with the vessel’s flag state. A common strategy Russia uses to evade oil price-cap restrictions and continue using its shadow fleet is registering the old vessels in countries with little or no regulatory control over the ships they allow to fly their flags. The ships that are flagged by these countries’ registries fly “flags of convenience.”

When a Russian shadow-fleet vessel is designated, Russia quickly switches ownership, name, and registration of the ship, many times to countries with lax controls. Flag hopping is a common technique Russia’s shadow fleet uses to evade restrictions.

According to the NGO Shipbreaking Platform—a global coalition of organizations that work to reverse the damage caused by shipbreaking practices, such as recycling, dismantling, or demolition—flags of convenience registries are in most cases not government agencies, but private companies situated outside the actual flag state or operating from different branch offices run by agents. Despite having ratified several international maritime and labor conventions, these registries often lack the resources or the will to enforce international law effectively. Popular registries in places such as St Kitts and Nevis, Comoros, Palau, and Tuvalu, allow ships to quickly change their flags to evade sanctions.

The International Chamber of Shipping in February added four new flag statesto its monitoring system, reflecting concerns about them being used in sanctions circumvention. Cambodia, Eswatini, Gabon, and Guinea-Bissau are being used by shipping companies to bypass western sanctions on Russia and Iran. Eswatini is a distinct concern because it’s not a signatory to international maritime conventions.
The EU in its 14^th package of sanctions against Russia in June 2024 designated 27 ships, including likely shadow fleet tankers, that transport Russian oil above the price cap and those transporting military equipment and stolen grain from Ukraine. Among the vessels was the Djibouti-flagged crude oil tanker Apar that was formerly known as the Andromeda Star and sailed under the flag of Panama.
The UK in October 2024 added Sai Baba, a Gabon-flagged crude oil tanker, to its list of sanctioned vessels. The ship after its designation by the UK switched from the Gabonese to the Djiboutian flag, and as of January 14, 2025, the vessel’s name appears to have changed to Lahar.

With hundreds of Russian vessels sanctioned by global jurisdictions as part of the country’s shadow fleet, screening vessels against sanctions lists and conducting enhanced due diligence on ships that are flagged in jurisdictions with lax registration requirements is a basic necessity. Examining the registration histories of vessels, noting the age of a ship that could be operating past its traditional lifespan, and closely checking insurance documents from providers in jurisdictions with opaque or limited regulations can also help detect suspicious activity.

Other Red Flags

Investigators at financial institutions and law enforcement can use the following indicators to examine counterparties to transactions when performing due diligence research on documentary trade transactions, when examining transactions that involve risky jurisdictions or customers, or investigating possible violations of the price cap. When involved in documentary trade transactions, financial institutions can gain insights into red flags such as histories of frequent name changes and other indicators listed below.

Ownership

The EU has noted that vessels with ownership and insurance outside G7 and EU jurisdictions may be part of Russia’s shadow fleet, which helps them to avoid western oversight. The use of complex ownership structures involving multiple levels of obscure shell companies in jurisdictions with lax transparency requirements can also indicate that the vessel is part of Russia’s shadow fleet. In addition, the Price Cap Coalition in October 2024 recommended monitoring tanker sales to ensure that aging tankers that were previously designated aren’t being recycled and used to continue evading sanctions. A vessel that has changed ownership multiple times—especially after Russia’s full-scale invasion of Ukraine—can indicate that the ship is part of Russia’s shadow fleet and warrants closer scrutiny.

Aging Vessel

The trade in older vessels has become lucrative for companies that sell these ships to Russia for use in the shadow fleet. The number of vessels being scrapped has dropped nearly to zero, according to UK media reporting, while the price for aging secondhand tankers has increased considerably. The average price of a 15-year-old crude tanker has risen from about $32.5 million before the war started to $54 million, as of December 2024. Although a secondhand, aging vessel may not necessarily be involved in Russia’s illicit oil trade, the use of these ships is an indicator of possible price-cap evasion that warrants closer scrutiny.

Ancillary Costs

Ancillary costs refer to expenses that are paid by purchasers of oil above the base price of the oil itself. These costs can include shipping, freight, and insurance costs. The Price Cap Coalition advises that stakeholders should obtain documentation that includes an itemized list of ancillary costs as evidence that prices for these expenses haven’t been inflated to offset the price-cap discount. Monitoring the prices of shipping, freight, and other ancillary costs and closely examining receipts and documentation that itemizes these expenses can help maritime stakeholders avoid transacting with Russian sanctions violators.

Ship-to-Ship Transfers

Ship-to-ship (STS) transfers are not a new sanctions evasion technique. North Korea has been using illicit STS transfers and other deceptive shipping practices to import refined petroleum, transport coal, and evade other restrictions for years, according to the Foreign Ministry of Japan. The STS involves the movement of cargo from one ship to another while at sea. Russia has also been using these clandestine transfers to keep its oil exports flowing, especially at night or in areas at high risk for sanctions evasion or other illicit activity. These transfers also involve disabling or manipulation of automatic identification systems (AIS), according to the UK’s Royal United Services Institute defense think tank, to obscure the transfer of illicit cargo.

AIS Manipulation or Disabling

Ships in Russia’s shadow fleet sometimes turn off or disable their AIS transponders, “going dark” while at sea, making vessels invisible to tracking systems, according to an EU briefing. These blackouts usually occur when a vessel is approaching a high-risk activity area, such as an STS transfer zone. After conducting the transfer, vessels may reenable their AIS to appear compliant, creating gaps in tracking data. Stakeholders should be aware of the locations of STS transfer zones and monitor for AIS blackouts in or near those areas. If a ship needs to disable its AIS in response to a legitimate safety concern, it should document the circumstances that necessitated the blackout. By requiring contractually that ships with which they engage use AIS in accordance with the Safety of Life at Sea (SOLAS) convention and document anomalies and changes, industry stakeholders can reduce their compliance risks.

Fraudulent Documentation

Complete and accurate documentation, attestations, and transaction and shipping documents are crucial to ensuring compliance. Falsified documentation can be used to disguise the true price paid for Russian oil and obscure the origin of a vessel, its goods, destination, and even the legitimacy of the vessel itself. This could lead to Coalition services unwittingly being used to support non-price cap compliant transactions. For example, the UK’s Office of Financial Sanctions Implementation (OFSI) lists numerous indicators to help stakeholders identify fraudulent certificates of origin in transactions that may involve Russian oil, including listing a country that doesn’t normally produce oil or oil products or a sudden increase in volume of oil shipments.

Some vessels in the shadow fleet have shifted away from industry standard classification societies, which play a key role in assessing and ensuring the seaworthiness of vessels. Therefore, ensuring that vessels receive classification from the International Association of Classification member societies and examining these documents closely for signs of fraud can help compliance efforts.

Conclusion

Entities involved in the trade of Russian oil above the price cap can use numerous methodologies to evade the restriction. Financial institutions and other stakeholders in the maritime energy industry must enhance their due diligence efforts, to include monitoring for shipping irregularities, examining and reporting possibly fraudulent documentation, and tracking shipments and their voyages to detect anomalous behavior. Documentary trade transactions provide numerous resources that can be examined for red flags.

Verification is crucial to detecting and deterring involvement in shipments of Russian oil and oil products that violate restrictions. OFSI recommends checking the validity of certificates of origin using the International Chamber of Commerce’s online tool. The Price Cap Coalition recommends reporting ships that trigger concerns to relevant authorities and avoiding interactions with sanctioned parties.

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